Insider trading technicality lets members of Congress profit millions

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00:00This is an undisputed fact on Capitol Hill.

00:03Members of Congress use non-public information that only they have

00:07to make incredibly profitable stock trades.

00:10It makes some lawmakers sick of the place.

00:12Everybody talks about this place being a dadgum swamp.

00:15It's not a swamp.

00:16A swamp is something cool God created.

00:18It filters water, animal life lives and flourishes around it.

00:22This is a sewer.

00:23This is created by man, and it needs to stop.

00:26It's natural to say if someone is making stock trades

00:31with non-public information, isn't that insider trading?

00:35Thanks to an SEC technicality, it's not.

00:38But bipartisan rank-and-file members are pushing to make that illegal.

00:41It's well known that one of the most prolific traders on Capitol Hill

00:45is Speaker Emerita Nancy Pelosi.

00:48Thanks to some extraordinarily well-timed investments

00:50by her venture capitalist husband,

00:52the family is worth an estimated $278 million.

00:57That's why one of the bills to ban stock trades and ownership

01:00is called the Pelosi Act.

01:02She's got access to information, just like other members of Congress,

01:05that the public doesn't.

01:06And technically, that's not insider trading.

01:09So it probably isn't illegal, but it ought to be.

01:11And we ought to ban it.

01:13Hulley is correct.

01:14Even if members of Congress are making stock trades

01:16with information they obtained because of their position,

01:19that's probably not insider trading.

01:22The SEC defines an insider as company officers, directors,

01:26or 10% stockholders, or anyone who possesses inside information

01:31because of their relationship with the company.

01:33It also applies to people who get a tip.

01:35The trade must also be based on material, non-public information.

01:40That includes changes to forecasted earnings,

01:43loan defaults, mergers and acquisitions,

01:45and new product announcements, to name a few.

01:47Members of Congress get a lot of information we don't get,

01:50but it doesn't necessarily relate to specific companies.

01:53It has details on industries, the economy, and intelligence about world events.

01:58It's still far more intel than the average American and even some stockbrokers have,

02:03but based on that SEC definition of an insider,

02:06they're technically on the outside.

02:09And if they get information that pertains to a specific company,

02:12it often has to do with official government actions, like a new contract.

02:15But although that's hard to find, and they certainly learn it first, it's public.

02:20When members are making decisions for how to vote on a bill,

02:23we should be thinking about what's best for the American people,

02:25not what is best for our investment accounts.

02:28And members of Congress have access to all kinds of inside information

02:31that the average member of the public does not.

02:34So the opportunity for corruption is unacceptable.

02:39Members in the House and Senate are both continuing their push to get a stock trading bill approved.

02:44There's the Pelosi Act and the Restore Trust in Congress Act,

02:48which prohibits members of Congress and their families from owning or trading stocks and other securities.

02:53Neither of these bills have gotten beyond the first steps of the legislative process.

02:57Congresswoman Sarah Jacobs stated,

02:59As one of the richest members of Congress,

03:01if I can co-sponsor the bipartisan Restore Trust in Congress Act

03:04to ban members of Congress and their families from owning and trading individual stocks,

03:09then every member should too.

03:11Jacobs is worth an estimated $86 million thanks to her billionaire grandfather

03:16who founded the tech company Qualcomm.

03:18By the way, this is the argument against a congressional stock trading ban.

03:22This is a free market and people,

03:24we are a free market economy that should be able to participate in that.

03:28Pelosi has since come out in support of stronger ethics rules regarding stock trading in Congress,

03:33as long as it also applies to the president and vice president.

03:37It's worth noting that Congress tried to stop this practice in 2012 when it approved the Stock Act.

03:43They passed rules to prohibit members of Congress from making trades based on information they receive on the job.

03:49Experts say it appears to have failed to stop investments that may present a conflict of interest.

03:55But it does require disclosures for trades over $1,000,

03:59and that has helped the public see exactly how entangled some members are in the markets.

04:04I'm Ray Bogan for Straight Arrow News.

04:06For more unbiased reporting straight from our nation's capital, download the SAN app.

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